You all have heard it said that wind energy needs subsidies to compete with other forms of electricity generation. We have often written on this subject before, and it seems appropriate to restate the arguments.
The context of wind and solar comparisons usually revolves around grid parity with existing fossil fuel fired plant. Most generation plant is relatively old now and the boilers and turbines are fully depreciated. The only costs that are incurred are the fuel cost and the staff costs. Wind and solar costs are only about the capital expenditure, as running costs are low and the fuel is free. There is no effective way to compare an old fossil fired plant, which has to be replaced in the next ten years, and whose fuel is expensive, and highly variable, with a wind or solar plant, whose fuel is fixed and free, as well as having an infinite life. This is without placing any value on the principle externality, ie CO2 pollution. Wind makes electricity without producing CO2.
The world insurance companies are currently picking up the cost of the effects of global climate change, for companies or countries that are insured that is. Many countries self insure, particularly in the emerging markets. One way or another society pays for the catastrophic costs of the effects of 400 PPMV CO2.
There are few places where real comparisons can be made. In South Africa for instance, the Parliament commissioned a study of the costs of Medupi and Kusile, two coal fired plants under construction. These plants have known capital costs and known fuel costs. The coal is produced locally and is not internationally traded, so there is no variability associated with its price. The levelised costs of the unit of electricity, from these plants is 0.99 Rand per kilowatt-hour. In the latest round of the competition for wind energy, the average kilowatt-hour price was R 0.89. In a like for like comparison wind energy is cheaper than coal. No charge is made in Medupi or Kusile for pollution abatement costs.
In the case with nuclear, the comparison is clearer. Flamanville in France is costing €5.15 million per megawatt to build. In Finland Olkilauto 2 is costing €6 million per megwatt to build. This is around three times more expensive than on shore wind generation, and 75% more expensive than offshore wind generation. Governments do not have to commit to being the insurer of last resort with wind as happens with nuclear. Nor is a need for a massive sinking fund, usually provided from direct taxation to decommission the nuclear plant, or for an equally large fund to decommission the nuclear materials reprocessing plants.
There are costs associated with high penetrations of wind energy which we will discuss shortly.